Monday, September 28, 2009
Although the market is taking this increase well (the stock moved up by about 4% since), it is apparent that some people are questioning this increase. The company has fared well during the ongoing recession, but has really not improved earnings. So is increasing the dividend a wise move? Only time will tell.
Personally, I believe that over the long term things will work out. The move may have been a bit premature, and designed as a way to reassure investors that the company is confident about the future. After all, the stock hasn't moved much during the market comeback during the last 6 months, so maybe the company felt it needed to send a message to investors: "We still make money for you, one way or another." Maybe this move will simply mean that next year's dividend increase will be smaller. It all evens out in the long term.
In the meantime, I will simply keep collecting those dividends in my RRSP.
Thursday, September 24, 2009
Why did I select this company? First, I like their new gourmet burgers (both the Angus and the Chicken), as does Princess. Much better quality and taste, and somewhat heftier portions (no need to buy a second burger with that one). Theirs salads have also improved significantly.
Second, the company's stock did not follow the rest of the market during the last 6 months' steep climb. I believe it still presents interesting balue and potential at less than 15 times earnings. The dividend yield is also good at 3.5%, The company has a solid history of raising dividend, with a 5-year dividend growth rate of 32%.
I purchased 50 shares at about $55.50 per share.
Friday, September 18, 2009
As of September 1st, my net worth was $86 909 (up 3.9% from $83 682). If I exclude house-related assets and liabilities, my net worth was $58 963 (up 4.9% from $56 225).The markets kept going up in August, which explains most of the increase. We kept spendings quite reasonable during our vacation, so it had no impact on our finances.
Assets ($151 903, up 1.7% from $149 412)
- Bank Accounts $4 849 (down 4.7% from $5 088)
- Emergency Funds $2 697 (up 3.3% from $2 612)
- RRSP Accounts $38 418 (up 4% from $36 953)
- Non-Registered Investments $17 094 (up 7.2% from $15 946)
- Home $88 050 (stable)
Liabilities ($64 994, down 1.1% from $65 730)
- Credit Cards $4 706 (down 5.2% from $4 964)
- Mortgage $60 105 (down 0.8% from $60 593)
- Line of Credit $0 (stable)
- Debt / assets: 0.428 (down from 0.434)
- House value / total assets: 0.580 (down from 0.589)
Both my registered and unregistered investments went up significantly this months, while the credit cards went down a little bit. (Remember that the amount on my credit cards is either 0% financings or thrrent balance that gets paid every month. So it is all non-interest bearing debt.)
I got the estimate for the repairs of the chimney ($1 350), which will be performed at the end of the month.
Saturday, September 12, 2009
ENSCO International Incorporated is an international offshore contract drilling company. As of February 17, 2009, its offshore rig fleet included 43 jackup rigs, two ultra-deepwater semisubmersible rigs and one barge rig. The company also has six ultra-deepwater semisubmersible rigs under construction.
The financial situation of the company is quite good. Long-term debt stands at $274 M, for a company with a book value of $4 677 M, operating cash flow of $1 140 M and net income of $1 151 in 2008.
Of course, the drilling industry is being severely affected by the recession, and ENSCO is no exception. Compared to earnings per share of $8.17 in 2008, the estimates for 2009 and 2010 are about $5.40 and $4.10, respectively.
The company's shares were trading at about $39 when I made my purchase. Using Benjamin Graham's formula to determine its fair value gave me a fair value between $63 (based on 2009 estimated earnings and current book value of $32.95) and $55 (using 2010 EPS estimates). That's a margin of safety of 30 to 40%. The company has been buying back shares in the last couple of years, reducing the number of shares from 152 millins in 2006 to 141 millions in 2008.
Considering that offshore drilling is not about to go away, I am fairly confident that over the mid- to long-term, the company will do well. Its small debt load and hefty cash flow will allow it to easily survive the recession. The company has been around for a while, and has valuable expertise in offshore drilling, including ultra-deepwater drilling. It seems unevitable that the price of oil will climb back above $100 per barrell once the recession is over. This means a resumption of offshore drilling.
The company also pays out a minuscule dividend of $0.025 per quarter, for an annual yield of %. The dividend is so small that it was completely irrelevant to my decision to buy this company.
I consider the company a value investment for the medium term (about 5 years). As such, I only established a small position in the company (50 shares).